All living things grow if they’re healthy. You don’t have to make them grow — it’s just natural for living organisms. As a parent, I didn’t have to force my six children to grow. They grew up naturally. As long as I removed the obstructions, such as poor nutrition or an unsafe environment, their growth was automatic.

The same principle is true for a healthy organization of people. An organization is a living organism – an interrelationship of people and processes, and it is natural for it to grow if it’s healthy, and if the obstructions are removed. I refer not to a growth size (although that may a natural consequence), but in the process of relentless maturing. Every growing organization is always re-evaluating itself and looking for that next step in its growth pattern. These are the companies, departments, functions, etc. that are always reaching to be better. Along the way they try things and take risks that, if lead by good leaders, pay off – more often than not.

However, the antithesis is true also – if an organization is not growing, it is dying. Just like the human condition, organizations that are not growing eventually die. There is not such thing as a stagnant organization. Growing firms know that the status quo will eventually kill them. The author Alan Deutschman said it succinctly: “Change or die”.

Better, Faster, Cheaper

We deal a lot with distribution organizations that wrestle with the how to keep growing – doing things better, faster, cheaper. At some point along their growth path, these distribution organization will often realized that, in order to move to the next level, some degree of automation will need to be introduced. I am using the term automation here to mean the substitution of equipment and systems for physical and mental work. This introduction can take years to justify, design, install, start-up, and mature. Sometimes, it is installed in a “big bang” transformation; other times it is gradually phased-in over many years. But once that next level of improvement is realized, the healthy, distribution center with a growth culture can be at a perceived plateau. So what’s next? Does the growth pattern cease? Does the “getting better” stop? A distribution organization that has a built in growth culture must just look for other areas to improve in.

I was with a company several years ago that found itself in that very place. We had three business units, each with their own distribution center. The DCs had gone through several stages of automation. But after several years of sizable incremental improvements, the growth curve started to “flat line”. We had focused on systems and MHE improvements over the years and had reaped the benefits of investment in those assets. With a culture of continuous improvement to guide us, we started looking at other assets to invest in. The nature place to look was at our own people.

As we invested in automation over the years, our processes became very efficient, but somewhat less flexible. It was difficult to get a high speed sortation system to quickly change to some other function as the need arose. I am not saying that we did not need the specialization of high speed sortation systems – we did. However, to compliment the efficiency we got from our automation, we decided to focus on creating a workforce that was highly flexible. And we became convinced that to be highly flexible, our people had to be highly motivated and highly skilled. So we embarked on a voyage of Continuous Employee Development (CED).

Our goal in Continuous Employee Development was to create a culture where constant development was not only encouraged, it was expected. It was talked about, planned for, staffed, budgeted, and measured. It was never a project unto itself, but most projects came out of it. The main paths of creating the Continuous Employee Development were the following:

Develop a Continuous Development Culture

This was much easier said than done. It started at the top. Management had to lead the way by making continuous development a priority. Continuous development was planned for and programs put in place to facilitate it. We talked about its importance, both to the company and to the individual. But that was not enough. To make it real, we had to put “feet on it”. We had managers that went back to school to get degrees. We started a program of reading management books and sharing insights. A Manager of Employee Development was hired to manage programs and keep people accountable. Budgets were rewritten to include funds for training and education. Measurement and financial systems were changed. In fact, to emphasis the desire for maximum flexibility, all departmental budgets (Inbound, Kitting, Returns, Shipping, etc.) were collapsed into one category: “Distribution”. In short, every effort was made to weave this into the fabric of our distribution organization.

Expect Development

As part of this cultural change, Continuous Employee Development became an expectation. From the new hire to the tenured employee, everyone was expected to continually learn and develop as an employee and as an individual. The newly hired employee started by learning “their job”, and then quickly progressed to learning all the jobs in the DC – a process that took about 2 years. The tenured employee, one that had already learned and was proficient at all the DC functions, was still required to develop. For some of these employees, starting a college degree program was required. For others, team leadership or supervision training and experience opportunites were presented. Every CED Plan was personally tailored to each employee.

Define, Evaluate, Analyze, Instruct, Measure

The real strength of the culture, however, was at the grass roots level. Once the expectations were set, a process had to be put in place to manage them. As I stated before, maximum flexibility was the goal of CED. In order to achieve this, we had to put a process in place to insure that people had the skills and knowledge to be highly flexible. Our goal was 100% flexibility – everyone capable of doing any job in the DC. In order to start that, we had to define all the functions and refine SOPs that were not current. Further, we had to write training material. And since we planned to reward cross training, we had to write tests and determine how much OJT hours were needed for each function in order for someone to be proficient. All this information was tracked on databases by CED experience and employee. An Employee Development Manager worked with employees and managers to set goals and hold people accountable.

Reward Flexibility

The entire compensation program was changed as a result of CED and the desire for maximum flexibility. Employees were paid, in part, for what they could do, not only what they did. In order to promote team work, a Goal Sharing program was started to reward the entire organization for meeting flexibility and continuous improvement goals.

One of the challenges of this progression came when people had to move from function-to-function, department-to-department so they could get their CED hours in. This never came at a good time and supervisors, tasked with getting the day-to-day done, often dragged their feet before moving people out of critical job functions. So, in order to incent them, we measured the total CED hours required by a supervisor employees against the actual hours spent, and tied supervisor bonus’ to this performance metric. That helped considerably.

Results that Don’t Stop

From the first year to the fourth year of the CED change, over-all productivity increased by about 10% per year – about a 50% percent total improvement in productivity. Since this was a cultural change, it is hard to speculate beyond that timeframe. For as a growing organism, other improvements were made to the DC that masked the pure CED results. But, like many good programs that provide long-term benefit, it continues to take management holding fast to the principle of people as a strength and continuous development as a way of life.

2 comments

We are currently in the situation you described earlier where our incremental improvements are starting to “flat line.” Economically, a big bang automation initiative is not in the cards and we are struggling with staying focused.